China should ensure the stability of its currency to help avoid falling into financial crises, even though the country has undergone stable and fast growth in the past five years, says the central bank governor.
"Developing countries should boost confidence in the local currency, market and central bank to prevent and handle financial crises," according to a transcript of Zhou Xiaochuan's comments on the People's Bank of China Website yesterday.
These countries are required to maintain stable currencies, adopt flexible exchange rates, ensure confidence in currency convertibility and enhance the economy's adaptability to all kinds of shocks, according to Zhou's comments at a recent Beijing forum.
The yuan has climbed more than 10 percent against the dollar since a peg was scrapped in July 2005.
Zhou said in an earlier report that China is committed to advancing currency reform and reforming its financial sector "step by step," but it has not set a timetable for the full convertibility of the yuan.
Zhou said in the forum that the country should learn from past mistakes and crises.
It's normal that financial crises happened every several years, and the key is to "learn new things from each crisis to improve the system," Zhou said.
Emerging markets can learn from other economies as many developed countries have experienced similar problems, Zhou said.
"The central bank should strengthen analysis to prevent potential risks and prepare preemptive plans," Zhou said.
He also cited other cases including this year's US subprime mortgage crisis.
(Shanghai Daily December 6, 2007)